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See all posts Frank GogolPrivate Party Auto Loan: How to Get a Personal Loan for a Used Car
Updated on April 9, 2024
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Not every city has the best public transportation, and in many places in America owning a car is all but a necessity. Most people are dependent on their cars for everything from getting to work on time to buying and transporting groceries.
However, cars are also very expensive, and not everyone can afford a new car from a manufacturer. Purchasing a used car directly from a private owner can often save you money, and a private party auto loan can provide the financing that you need to make the purchase.
Benefits of Buying a Used Car
While flashy new cars can be alluring, they also provide a much lower cost-value. New cars lose a substantial portion of their value the moment they are driven off the lot.
A used car, on the other hand, will depreciate at a much slower rate, saving you money in the short and long-term. And that’s the only way buy used will benefit you.
Check the list below for a few examples.
Lower Price Tag
As mentioned above, the value of a car depreciates the most right after its purchase, so buying a used car will spare you the markup for new cars. The difference in the price tag is not reflected in the quality of the car, though. A car that is one or two years old, or even five years old, should still function perfectly well. By going used, you save a huge amount of money without sacrificing functionality.
No Sales Tax
Besides the already exorbitant sticker price of new cars, many states charge a sales tax for new cars, but not used ones. This sales tax can add thousands more to the cost of purchasing a new car. Research your state’s tax laws and see if used cars are exempted from sales tax.
No Dealer Fees
New car dealers typically charge significant dealer fees on the purchase of new cars as well. These fees can easily run as high as $500, or even more. When you buy used from a private seller, you avoid these fees entirely.
What is a Private Party Auto Loan and How Does One Work?
Auto dealers typically provide a range of financing options, but, when purchasing a car directly from an owner, the primary financing option is a private party auto loan. A private party auto loan is a loan issued by a lender for the purpose of purchasing a car from a private party, who is typically the owner of the car. These
Getting a private party auto loan first involves qualifying for a loan. You will likely require a minimum credit score and income to be eligible for a loan.
You can apply with a lender for the amount that you need, and most may even pre-approve you for a loan before you have found a car.
Either way, once you have found your ideal car, you submit the loan application, and, once you receive the funds, complete the purchase.
How to Get a Private Party Auto Loan
A private party auto loan is a simple and quick way to get the funds that you need for purchasing a used car. Qualify for a private party auto loan by following the steps listed below.
Compare Rates
First, you should investigate different lenders and see the interest rates that you qualify for. Each lender will have its own methodology for assessing your finances and determining rates. By getting quotes from multiple lenders, you can determine the most cost-effective private party auto loan.
Meet the Eligibility Criteria
It is also important that you investigate the eligibility criteria of different lenders so that you can determine if you qualify or not. Lenders vary in their criteria for eligibility, with some focusing entirely on credit score and income and others taking more peripheral factors into account. If you cannot meet the minimum income or credit requirements, getting a cosigner may help you qualify. Also, noncitizens may have difficulty obtaining an auto loan, so investigate if the lender gives
Apply
Once you have found a lender that has eligibility criteria that you can meet and that offers the lowest interest rate, you can submit an application. Private party auto loan applications typically involve divulging important financial information and authorizing a soft credit pull. These applications can usually be completed quickly, and a good lender will give you a response within a day or two.
Personal Loans
for Used Cars!
Loans for up to $25,000. No cosigner required. No prepayment penalty.
5 Tips for Buying a Car from a Private Seller
Buyers must be careful when purchasing a used car from a private seller. See the following tips for some factors to keep in mind when doing your due diligence on a potential purchase.
Understand the Benefits
If you are going to buy used you should understand the benefits, so you can get the most leverage when you negotiate a price. Private sellers often must sell their cars quickly so that they can purchase a new car, which will make them highly motivated when a serious buyer comes along. As long as you know that you have the upper hand in the negotiation, you can bargain for a lower price.
Know the Risks
Purchasing from a private seller will help you get a lower price, but it is also riskier than purchasing from a dealer. Dealers typically must thoroughly test a car and ensure it is in proper working function before selling it. A private seller does not have the same obligations, so the risk of the car failing, or not performing as advertised, is greater.
Do Your Research
You can substantially mitigate this risk, and also ensure that you do not overpay, by researching the vehicle before purchasing it. Websites like Carfax and Kelley’s Blue Book can provide detailed information on pricing and performance that you can compare against the information the seller provides. Use these sites to pinpoint the ideal price, along with the history and performance of the car.
Test Drive the Car
Do not just settle for an online report, though; get your hands on the wheel and test the car before purchasing. Listen for unusual engine sounds, test different functions of the car, like the AC and windshield wipers, and drive the car on difficult terrain to see how it performs. This is one of the simplest ways to avoid problems with performance.
Have a Mechanic Take a Look
Getting the car thoroughly inspected by a mechanic is perhaps the best way to ensure it functions properly. Rather than going to a mechanic the seller suggests, use your own, one whose opinion you can trust. Ask the mechanic questions about the car’s equipment and performance, and see if it matches the seller’s description.
Conclusion
As long as you are prudent, purchasing a car from a private seller will help you save money without sacrificing anything in terms of performance. Choosing a private seller and financing your purchase with a private party auto loan can spare you exorbitant markups, dealer fees, and taxes.
Personal Loans
for Used Cars!
Loans for up to $25,000. No cosigner required. No prepayment penalty.
Frank Gogol
I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.